Flagging the Issues: Maritime Governance, Forced Labor, and Illegal Fishing

Illegal, unreported, and unregulated (IUU) fishing poses a severe threat to marine ecosystems. IUU fishing subverts efforts to manage fisheries sustainably and conserve crucial marine biodiversity. The Food and Agriculture Organization of the United Nations (FAO) estimates that 34 percent of fish stocks are overfished, and 60 percent are fully fished. Additionally, the International Labor Organization (ILO) reports that forced labor and human trafficking in fisheries remains a significant problem, abetted by IUU operators. Enforcing existing rules has proven nearly impossible. One of the most significant hurdles to overcome is the complex knot of maritime jurisdiction, particularly involving the flagging of ships.

Q1: What is IUU fishing, and why is it problematic?

A1: Illegal fishing occurs within waters under jurisdiction of a state without permission, is otherwise illegal in that state, or violates rules of a regional fisheries management organization (RFMO). Unreported fishing occurs when catches are not reported or are misreported to the jurisdictional national authority or RFMO. Unregulated fishing occurs in areas with no applicable conservation management but where fishing is inconsistent with marine conservation responsibilities. It can also occur in RFMO waters by a vessel flagged to a state that is not a party to that RFMO.

IUU fishing could have severe economic, environmental, and humanitarian consequences. A widely cited paper estimates that in 2003, IUU-caught fish were 11–19 percent of fish catches with an estimated value of $10–23 billion annually. Another study estimates that in 2011, 20–32 percent of U.S. imports of wild-caught seafood were illegal. It has been suggested that the estimated economic loss from IUU fishing is between $26 and $50 billion annually.

Forced labor connected to IUU fishing is difficult to monitor because it occurs in an isolated and secretive environment. A recent study using satellite tracking estimated that approximately 14 percent to 26 percent of identified vessels were at high risk for using forced labor. A recent congressional report identified 29 countries at risk for human trafficking in their seafood sector, including major labor suppliers like China and Indonesia. Reports from bodies like the UN and the ILO, as well as reporting by journalists, have underscored the brutality and severity of labor issues within the fishing industry.

Q2: Who possesses jurisdiction and enforcement authority over the ocean?

A2: Monitoring maritime issues is extremely difficult, given the sheer size of oceans, the lack of monitoring resources, and the jurisdictional obstacles to enforcement. Coastal states have asserted control over waters adjacent to their territory for defense and economic purposes, and international law recognizes defined areas where coastal states implement differerent levels of sovereignty and jurisdiction. States exercise the same level of sovereignty and jurisdiction over internal waters that they do over land; a state’s territorial sea extends from that baseline to 12 nautical miles, granting the state sovereignty and jurisdiction over those waters.

The 1982 United Nations Convention on the Law of the Sea (UNCLOS) defines a state’s exclusive economic zone (EEZ). A state can claim an EEZ that extends 200 nautical miles from its baseline. Within EEZs, states have sovereign rights over exploring, exploiting, conserving, and managing the natural resources and jurisdiction over the “protection and preservation of the marine environment.” The United States has not ratified UNCLOS—the largest state not to ratify—but recognizes EEZs as customary international law, in part because the United States has the world’s largest EEZ. In the context of IUU fishing, the state holds jurisdiction and sovereignty over its waters and marine resources, and it can enforce its own fishing rules within those boundaries.

There are some important limits to this approach. First, it is difficult to manage and monitor jurisdictional waters, particularly for states with limited resources. Second, 64 percent of oceans are considered to be the high seas or international waters, meaning that they are neither territorial waters nor part of an EEZ and thus not subject to any kind of coastal state jurisdiction. If states have overlapping EEZ claims, UNCLOS Article 59 calls for an equitable agreement. However, if states cannot come to an agreement, significant conflict can arise, as seen with competing claims in the South China Sea and associated threats to fish stocks. Lastly, a territorial dichotomy emerges—a party is either subject to the jurisdiction of coastal state or it is not. However, fish do not respect invisible lines in the sea. There is also another important jurisdictional issue: the ship itself.

Q3: How is jurisdiction over a vessel and persons aboard established?

A3: Jurisdiction over a physical vessel and the people onboard is held by the state whose flag the ship flies, known as the “flag state.” UNCLOS Article 94 establishes that a state assumes jurisdiction over ships flying its flag, including ensuring that the ship and its operators are observing all relevant laws and regulations and that states’ internal laws are applied onboard. This right of exclusive authority is broadly recognized, including by the U.S. Supreme Court in Lauritzen v. Larsen.

UNCLOS Article 90 provides that any state has the right to flag a ship. Article 91 states that there must be a “genuine link” between the state and the ship flying its flag. Practically speaking, however, jurisprudence on genuine linkages is weak. “Genuine link” is poorly defined and is often superseded by a state’s right to grant a flag. In other words, proof of a genuine link is often found in a ship being registered rather than as a pre-condition for registration.

Another consideration involves seafarer nationality. The people on board are possibly subject to their national state’s jurisdiction. This is particularly important when considering forced labor. There have been situations where a vessel is flying the flag of one state, operating within the waters of another, and using the labor of citizens of other states. If an incident occurs, such as a violation of labor rules, it is unclear who has the responsibility to prosecute. International law has not clearly answered these questions.

Q4: What are flags of convenience?

A4: Many vessels fly flags of convenience (FoCs). States that maintain a ship registry are flag states. Shipowners register a vessel and receive the privilege of flying the flag of that state. A closed registry places limits on registration, such as the requirement that the beneficial shipowner is a national resident. Some states maintain open ship registries, meaning any vessel can be registered. The UN Conference on Trade and Development (UNCTAD) estimates that 73 percent of the world’s fleet is flagged in a country where the beneficial owner is a foreign entity. These open-registry flag states and flags are FoCs. For the shipowners, there are clear benefits. Because the internal laws of a state apply to the vessel, owners can take advantage of differences in labor, tax, and safety regulations, often resulting in a race to the bottom in legal compliance.

For instance, Carnival Cruise Line is Florida-based, but their ships fly non-U.S. FoCs and thus are not obligated to pay U.S. taxes on revenue earned at sea, nor must Carnival pay U.S. wages to crew or observe relatively stronger U.S. labor laws. Many FoCs allow shipowners to remain anonymous, an issue when a state is trying to prosecute a shipowner. FoCs also allow the shipowner to be registered by front companies, providing an additional layer of secrecy.

Panama, Liberia, and the Marshall Islands are the most popular FoCs. Sixteen percent of global carrying capacity is registered in Panama, generating $500 million in annual profit for Panama. Liberia flags more than 4,800 vessels, approximately 13 percent of the global fleet and is expected to manage exclusive jurisdiction despite having no navy and six coast guard speedboats. Furthermore, the registry is headquartered in Virginia. Interpol considers this practice “private flagging,” meaning the registry is a commercial enterprise managed outside the nominal flag state.

Q5: What is the relationship between flags of convenience and IUU fishing?

A5: IUU fishing thrives in conditions of little transparency and with limited ability for states to sanction bad actors—conditions created by FoCs. FoCs are an “escape route” for companies engaging in IUU fishing. Identifying and levying sanctions on offenders is a critical component of breaking the cycle.

FoC states have failed to ratify key international agreements addressing IUU fishing and flag state duties, such as the 1993 FAO Compliance Agreement. Although both Panama and Liberia ratified the 1995 UN Fish Stocks Agreement, which obligates flag states to enforce compliance with rules on overfishing, it is difficult to see how states like Panama and Liberia, which register thousands of vessels and have limited resources, could meet their obligations. They may also lack the motivation to do so. Flag states accrue economic benefits from maintaining open ship registries, and it is relatively easy to switch the registration of a ship. Should a flag state establish and enforce stricter rules, ships would reflag to another state. Reflagging happens often, underscoring the race-to-the-bottom challenge. Interpol lists ships known to engage in IUU fishing. On average, these vessels were reflagged more than three times during their life span, and 25 percent were registered in five or more flag states. Some IUU vessels don’t bother to flag, and some vessels identified by Interpol had no identifiable flag. These issues are particularly pertinent in international waters, where the flag state is often the sole legal authority.  

Q6: How have states addressed these issues?

A6: Addressing IUU fishing is critical but complicated. It is perhaps simplest to start where the flag state has the least amount of jurisdictional authority, in port and ashore. The FAO Agreement on Port State Measures institutes standards for parties to apply to foreign vessels seeking entry into their ports, such as preventing the landing of foreign-flagged vessels known to engage in IUU fishing. The United States, the European Union, and Japan—major seafood markets—are parties, although China, the world’s largest seafood exporter, has yet to accede. Two U.S. representatives have introduced the “Illegal Fishing and Forced Labor Prevention Act” that would leverage U.S. authority by requiring importers to disclose location of catch, chain of custody, the beneficial owner, and information about labor conditions.

The European Union’s IUU regulation establishes a yellow and red card system. If a flag state does not enforce IUU rules, a yellow flag is issued. If non-compliance continues, a red card is issued, and fish products from that country will be banned from the European Union until measures are taken. Only four countries have an active yellow or red card—Cambodia, Comoros, St. Vincent and the Grenadines, and Ghana. Coastal states can also establish fishing rules and limits within their jurisdictional waters, both their territorial sea and EEZ.

Many states lack the capacity to monitor and enforce existing rules. States with greater monitoring and surveillance capacities should more actively support other coastal states. Ghana is estimated to lose between $14.4 million and $23.7 million annually from Chinese commercial trawlers evading Ghanaian enforcement, not to mention the loss of fish for subsistence fishers and damage to ecosystems. Ecuador, concerned about Chinese fishing near and possibly within the Galapagos Marine Reserve, requested monitoring assistance from the U.S. Coast Guard to ensure that the fishers didn’t violate the rules established in the Ecuadoran EEZ.

Q7: What are the limitations to existing and proposed solutions?

A7: There are limits to these solutions. In the context of the EU legislation, for example, it is simple for a Cameroonian-flagged fishing vessel to switch to another FoC to evade restrictions. Hypothetically, the United States could refuse to provide a bluefin tuna fishing license to all vessels where the beneficial owner is unknown. However, those vessels can still fish at 201 nautical miles from the U.S. coastline, where the tuna are unaware of U.S. jurisdictional control limitations.

The majority of the Earth’s oceans are high seas, and the flag state remains the most important legal authority. Ideally, flag states would not allow foreign-owned fishing vessels on their registry, but this is unlikely.

IUU fishing is somewhat addressed at the World Trade Organization (WTO). Current WTO fishery negotiations are not focused on jurisdictional issues but on eliminating fishing subsidies, including subsidies that are granted to IUU fishers. However, those eliminations are contingent on the declaration of IUU fishing. Within the WTO, the IUU fishing declarations can come from a coastal member for activities in their waters. Outside of jurisdictional waters, IUU fishing declarations can only come from the flagging state, an obvious barrier as states are unwilling to admit they have been allowing IUU fishing by their flagged vessels.

Transparency is also a key issue, and states should cooperate and share information about vessels and operators suspected of engaging in IUU fishing, possibly facilitated through international bodies such as the FAO. Challenges abound, but the consequences of not addressing IUU fishing will be severe.

Emily Benson is an associate fellow with the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C. Catherine Puga is a research intern with the CSIS Scholl Chair in International Business.

Critical Questions is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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Emily Benson
Senior Fellow, Scholl Chair in International Business

Catherine Puga

Intern, Scholl Chair in International Business